Washington, November 2010

Raising $100 billion per year by 2020 to help developing countries fight climate change is "challenging but feasible" if supported by taxes and auctioning of CO2 permits, a UN advisory group said on Friday (5 November).

The UN High-Level Advisory Group on Climate Change Financing handed over a report detailing how developed countries can make good on their financial pledges to help poor countries reduce their emissions and adapt to climate change.

The group was set up in February and features heads of state, finance ministers and economists, including financier George Soros and Lord Nicholas Stern, author of an influential report on the economic costs of climate change.

"We will need a variety of revenue sources from both the public and the private sectors," UN Secretary-General Ban Ki-moon told the press in New York. He said all countries would need to demonstrate a strong commitment to domestic efforts to cut global-warming emissions.

"These efforts, along with the introduction of new public instruments based on carbon pricing, will be among the keys to mobilising the required financing," the UN secretary-general said.

The report finds that a carbon price of $20-$25 for each tonne of CO2 emitted is necessary to raise funding in the amounts required. This would both provide incentives for reducing emissions in industrialised countries and offer a potentially huge source of finance for poor countries.

The report proposes new public instruments that could raise billions of dollars annually.

Auctioning emissions allowances and carbon taxes could mobilise around $30 billion, introducing carbon pricing for international aviation and shipping could bring in $10 billion and redirecting fossil fuel subsidies could raise $10 billion annually, the report states.

The Advisory Group also looked into a financial transaction tax levied on banks. But it acknowledges that it is "difficult to implement universally" because of the lack of political acceptability.

Private sector to fuel fund

The private sector would finance much of the expected low-carbon growth, according to the report.

A robust carbon price could generate gross private capital flows in the range of $100bn-$200bn for climate action in developed countries. Moreover, carbon offset markets could generate between $30 billion and $50 billion annually.

The Advisory Group sees a significant role for multilateral development banks in leveraging private financing for climate projects. It estimates that for every $10 billion of additional resources, institutions such as the World Bank could deliver $30-$40 billion in grants and loans.

The report comes three weeks ahead of global climate negotiations in Cancún, Mexico, where world leaders will try to find common ground on climate financing, which remains one of the most controversial issues.

"While we have thus done a very important part of the leg work that needs to be done for the negotiations on climate finance to proceed, the final and perhaps more difficult task of clinching a deal on the matter is yet to be accomplished," said Ethiopian Prime Minister Meles Zenawi, who co-chaired the group.

He urged leaders in industrialised countries to show the political will to use the report for an ambitious agreement.

Positions

EU Climate Action Commissioner Connie Hedegaard stressed that combining public and private funds is key to delivering on the funding pledge. She said that at least half of the revenues from auctioning EU emission allowances "should be used to finance climate action".

"Nobody should believe that it is easy to mobilise $100 bn/year from 2020; but the report shows that it is doable - even more so as the reality is that not investing this money will turn out to be more expensive. The EU will constructively engage in finding models that can secure that the world delivers, as we are already delivering on our fast-start commitments for 2010-2012," Hedegaard said in a statement.

Ethiopian Prime Minister Meles Zenawi and Norwegian Prime Minister Jens Stoltenberg, who chair the UN advisory group, said it would be "challenging but feasible" to mobilise $100 billion per year by 2020 for climate protection in developing countries.

"It is our hope that the UN, as well as its member countries and other relevant institutions, will take forward the main conclusions of this report in addressing the global challenge of climate change," they wrote in a letter to UN Secretary-General Ban Ki-moon.

Anti-poverty group Oxfam argued that the report confirms that developed countries can deliver on their funding pledges.

"This should be a clarion call to negotiators that we can crack the climate finance nut with innovative sources of public finance that don't shift the responsibility onto taxpayers. It is now up to political leaders to lay out a clear roadmap for making this public funding a reality," said David Waskow, climate change advisor for Oxfam.

The NGO stressed that only public funding can reach the most vulnerable communities, urging governments to ensure that funding come on top of existing aid targets.

Next Steps

29 Nov.-10 Dec. 2010: UN climate conference in Cancún, Mexico ( COP16). Objective is to advance negotiations on basis of Copenhagen Accord. No binding agreement is expected.

28 Nov.-9 Dec. 2011: UN climate conference in South Africa (COP17). Possible date for approving new international climate treaty.

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